Income tax department signs first rollback advance pricing pact

The Central Board of Direct Taxes (CBDT) has signed the first "rollback" unilateral advance pricing agreement (APA) with two multinational companies earlier this week, it was announced on Thursday.

"With this, the CBDT has so far signed 14 APAs of which 13 are unilateral APAs and one is a bilateral APA," the finance ministry said in a statement.

Advance agreements between a taxpayer and a taxing authority on an appropriate transfer-pricing methodology for some sets of transactions over a fixed period of time, APAs, for which the rollback norms were notified in March this year, provide tax certainty, thereby helping improve the investment climate in the country.

An APA with the "rollback" provision extends tax certainty for nine financial years as against five years in APAs without "rollback"

"The 14 APAs signed relate to various sectors like telecommunication, oil exploration, pharmaceuticals, finance/banking, software development services and ITeS (BPOs)," the statement said.

Finance Minister Arun Jaitley had announced the rollback provision in his budget, where the agreement entered into for future transactions might also be applied to transactions of the previous four years.

The transfer pricing issue has generated much controversy in India involving multinationals like Cairn, Nokia and Vodafone.

"The government is committed to conclude a large number of APAs to foster an environment of tax cooperation and certainty," the ministry said.

"Currently, a number of unilateral as well as bilateral APAs with competent authorities of UK and Japan etc are at advanced stage of negotiations," it added.